South Lake Tahoe shuts down motels in tax dispute
December 15, 2008
SOUTH LAKE TAHOE ” Nearly $200,000 in alleged unpaid taxes caused city officials to close two South Lake Tahoe hotels last week, leaving the managing partner of both properties outraged.
Eleven city vehicles ” including three police cars ” descended upon Cedar Lodge and The Block on Thursday afternoon, following an August closure order by City Finance Director Christine Vuletich.
Vuletich issued the order because a multi-agency transient occupancy tax task force found the hotels had accumulated $199,307.98 in unpaid TOT and business license fees, according to a press statement from South Lake Tahoe police.
“Customers who occupied the hotel (Thursday) were allowed to stay, but the hotels will remain closed until the TOT is paid,” City Attorney Catherine DiCamillo said Friday.
The Block failed to pay TOT between January 2007 and January 2008, and owed penalties and interest from September and December 2006, according to the police statement.
Managing partner of the hotels ” 37-year-old Las Vegas resident Eneliko Smith ” appealed Vuletich’s decision to City Manager David Jinkens, who upheld the finance director’s decision on Nov. 21.
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The closures are a “bullying tactic” to scare property owners into paying taxes, Smith said.
“Their goal isn’t really to get money for the improvement of the city; it’s to intimidate people into paying TOT,” Smith said.
Financial records detailing the unpaid taxes were lost when the hotels went through a series of bookkeepers and moved offices from Carson City to Las Vegas, Smith said.
Because of the lost files, a third bookkeeper was unaware of the unpaid taxes and the debt was not included when the financial records were re-created, Smith said.
“We screwed up” by losing the files and not including the TOT in the new records, but attempts to remedy the situation without closing the hotels have been unsuccessful, Smith said.
A weak economy has left the hotel owner without the cash to pay the back taxes, Smith said. The Cedar Lodge has a buyer and, after escrow closes in upcoming weeks, he will be able to pay off the debt, Smith said.
The hotel owner said it doesn’t make sense to close The Block before the busy holiday season, adding he is willing to make monthly $20,000 payments on the debt starting this week.
“I’m being as cooperative as a person can be who doesn’t have $200,000,” Smith said.
Smith has claimed that he will pay the outstanding TOT once the Cedar Lodge sale is finalized since “at least August” and has not made “even partial payments” toward the debt, DiCamillo said.
“He’s made several promises and he has not followed through on his promises,” DiCamillo said.
About 30 employees will be laid off because of the closures, Smith said.
An employee at The Block ” which markets itself to snowboarders and was the focus of a 2007 reality show ” said staff at the hotel created a “down-home family atmosphere.”
“It’s a little tough, man,” said 27-year-old employee Nathan Owen. “We did see it coming, but we hoped it would get cleared up. Unfortunately, it didn’t.”
The closures were “totally avoidable” said Owen, who added that he is now looking for work.
“We’re still kind of hoping things get settled, but we’re not holding our breath on that,” Owen said.
The Block has never laid off an employee before, and the timing of the closures is especially poor with the dreary economy, Smith said.
“It’s terrible right now. The last thing we need to do right now is close businesses,” Smith said, noting that he thinks the closures may be personal and the city has bigger problems than unpaid TOT.
“They have a problem with me or with The Block,” Smith said. “The greater issue is there is a big hole in the ground because of the city, and they’re trying to put attention on me,” Smith said.
There is no validity to Smith’s claim that the city is trying to draw attention away from the stalled convention center project, DiCamillo said.
The hotel closures are “all business,” and Smith has “to be current on payment of TOT like everyone else,” Jinkens said.
The forced closures are “regrettable,” but the amount of unpaid taxes justifies the action, Jinkens added.
“We’re supposed to turn a blind eye to that?” Jinkens asked rhetorically. “Most people would think that unreasonable. Every opportunity has been provided to Mr. Smith before we did what we did.”
Smith also faces criminal charges from the unpaid taxes.
On Aug. 29, the El Dorado County District Attorney’s Office filed one felony count of misappropriating public funds, seven misdemeanor counts of failure to furnish tax-return data and seven misdemeanor counts of failure to pay transient occupancy taxes against Smith, according to court documents.
The charges are “ludicrous,” according to Smith.
“I’m not a criminal,” Smith said.
On Nov. 24, Smith’s attorney, Stateline-based William Cole, filed a motion challenging the felony charge.
The criminal complaint is “uncertain” regarding the misappropriation charge and does not specify how Smith allegedly misused public funds, according to the motion.
The next hearing in the case is scheduled for Jan. 15 at 1:30 p.m.